01—Abstract
Summary
Summary of the 10-K filed February 15, 2018. Cited figures are marked; the original filing is the authoritative source.
Incyte Corporation reported a net loss of $313.1 milliona for 2017, compared with net income of $104.2 million in 2016, as total revenues rose to $1.54 billion from $1.11 billion.
Product revenues, net, were $1.20 billionb, driven by JAKAFI ($1,133.4 million) and ICLUSIG ($66.9 million, acquired June 2016). Product royalty revenues were $160.8 million and milestone and contract revenues were $175.0 million. The loss was driven largely by research and development expense of $1.33 billion, which rose from $581.9 million, including $359.1 million in charges for new and amended collaboration agreements with Calithera, MacroGenics, Merus and Agenus.
The balance sheet strengthened over the year. Cash, cash equivalents and marketable securities totaled $1.17 billionc at December 31, 2017, up from $808.5 million, supported by a September 2017 public offering that netted approximately $649.4 million. Stockholders' equity rose to $1.63 billion from $419.5 million, and the accumulated deficit stood at $2.0 billion.
Convertible senior notes fell to $24.0 milliond from $651.5 million after noteholders exchanged most of the 2018 and 2020 notes for common stock. The filing highlights a heavy dependence on JAKAFI (ruxolitinib) for both product sales and the company's royalty base. Its pipeline is broad, with 17 candidates against 14 molecular targets as of February 15, 2018, including epacadostat in multiple Phase III trials.
Baricitinib (OLUMIANT), partnered with Eli Lilly, received a complete response letter from the FDA in April 2017 and was resubmitted in December 2017 under a new six-month review cycle. Management reports that the company expects its cash, cash flow and marketable securities to be adequate for at least the next twelve months.
02—Key points
Key Highlights
- Total revenues of $1.54 billion in 2017, up from $1.11 billion in 2016, with product revenues, net of $1.20 billion.
- Net loss of $313.1 million (or $1.53 per share) in 2017, versus net income of $104.2 million in 2016.
- Research and development expense rose to $1.33 billion from $581.9 million, including $359.1 million in charges tied to new and amended collaboration agreements.
- Cash, cash equivalents and marketable securities of $1.17 billion at year-end 2017, up from $808.5 million, after a September 2017 stock offering netting about $649.4 million.
- Convertible senior notes outstanding fell to $24.0 million from $651.5 million following exchanges into common stock during 2017.
- JAKAFI generated $1,133.4 million in 2017 net revenue; the FDA's baricitinib complete response letter in April 2017 led to a Class II resubmission with a new six-month review cycle.
- Development portfolio of 17 candidates against 14 molecular targets as of February 15, 2018, including epacadostat in multiple Phase III trials with Merck, Bristol-Myers Squibb and AstraZeneca partners.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2017, Incyte lost $0.20.
- Revenue$1.54B100.0%
- Cost of revenue−$79.5M5.2%
- Gross profit$1.46B94.8%
- Operating costs−$1.70B110.7%
- Operating income−$243.4M15.8%
- Interest, other & tax−$69.8M4.5%
- Net income−$313.1M20.4%
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 15, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $1.54B$1.11B | +38.9% |
| Cost of Revenue | $79.48M$58.19M | +36.6% |
| Gross Profit | $1.46B$1.05B | +39.1% |
| R&D Expenses | $1.33B$581.86M | +127.9% |
| SG&A Expenses | $366.29M$303.25M | +20.8% |
| Operating Expenses | $1.78B$960.72M | +85.2% |
| Operating Income | -$243.39M$145.00M | −267.9% |
| Interest Expense | $6.90M$38.74M | −82.2% |
| Net Income | -$313.14M$104.22M | −400.5% |
| EPS (Basic) | $-1.53$0.55 | −378.2% |
| EPS (Diluted) | $-1.53$0.54 | −383.3% |
| Shares Outstanding (Basic) | 204.58M187.87M | +8.9% |
| Shares Outstanding (Diluted) | 204.58M194.13M | +5.4% |
05—Questions
Frequently Asked Questions
Why did Incyte swing from net income in 2016 to a net loss in 2017?
Research and development expense more than doubled to $1.33 billion from $581.9 million, driven by upfront and milestone charges of $359.1 million under new or amended collaborations with Calithera, MacroGenics, Merus and Agenus, plus clinical trial costs. Expense related to senior note conversions of $54.9 million and an unrealized loss on long-term investments of $24.3 million also weighed on results, though product revenue growth partly offset these costs.
How dependent is Incyte on JAKAFI?
The filing states that JAKAFI is the company's first and, currently, only product approved for sale in the United States, and that it expects JAKAFI product sales to continue contributing a significant percentage of total revenues over the next several years. JAKAFI revenues, net were $1,133.4 million in 2017, and JAKAVI royalties from Novartis are also tied to ruxolitinib.
What happened with baricitinib and the FDA?
In April 2017, the FDA issued a complete response letter for the baricitinib NDA for moderate-to-severe rheumatoid arthritis, saying additional clinical data were needed to determine the most appropriate doses and to further characterize safety concerns. Lilly resubmitted the NDA in December 2017, and the FDA classified it as a Class II resubmission starting a new six-month review cycle. Baricitinib was approved in the European Union as OLUMIANT in February 2017 and in Japan in July 2017.
Is the company's cash position sufficient to fund operations?
Management believes that cash flow from operations, together with cash, cash equivalents and marketable securities, will be adequate to satisfy capital needs for at least the next twelve months. Cash, cash equivalents and marketable securities totaled $1.17 billion at December 31, 2017. Operating activities used $93.0 million in 2017, and the filing notes that the company may need to raise additional capital in the future.
What is the status of the epacadostat program?
The filing describes epacadostat, an IDO1 inhibitor, as being in a number of Phase III clinical trials, including ECHO-301 with pembrolizumab in first-line melanoma, which received FDA Fast Track designation in July 2017. Additional Phase III trials cover NSCLC, renal, bladder and head and neck cancers with Merck, and programs with Bristol-Myers Squibb and AstraZeneca were also expanded in 2017.
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